Offshre Insights Help Guide Series www.neit.cm June 2003 Issue 1 HELP GUIDE SERIES: Visiting Offshre Suppliers By neit
Page: 2 Intrductin Risks surrunding ffshre utsurcing must be understd and addressed t achieve the financial and perfrmance gals that typically drive an ffshre utsurcing initiative. The ffshre supplier market is mature in sme areas and relatively immature in thers, hwever the quality f the supply base can be measurably higher than dmestic integratrs with mature perating mdels. Cnversely, the marketing nise is such that a clear distinctin must be made t determine if the supplier is actually capable f delivering t a client s specific scpe f wrk. Offshre deals that will either fail r nt live up t prmised results are generally predictable. T reduce the inherent risks, certain steps are necessary in ffshre transactins. The client must have a high degree f visibility f the supplier s capabilities, understand the supplier s culture and backgrund, understand the varius ffshre mdels and must chse a supplier that aligns strategically with the rganizatin. The ecnmics in the ffshre market are unlike the ecnmic rules f the United States r Eurpean Unin. Wages, prices and currency in develping natins are relatively unstable when cmpared t cuntries like the US and Eurpe. Tax laws can have a future impact n the supplier viability and plitical risks can hst a wide range f challenges. The difference that very small decisins alng the way t a cntractual relatinship, can mean tens, if nt hundreds f millins f dllars t the client. We encurage clients t take full advantage f a hsted supplier visit and the experience f market advisrs t nt nly de-risk the relatinship, but als maximize the ptential savings. Cmmn Challenges in Supplier Selectin Mst clients ntice very little difference in the sales presentatins f suppliers. Hwever actual experience, cmpany culture, and capabilities vary. It is imprtant that a client understand the strengths and weaknesses f each supplier t help ensure lw risk, high value relatinship. Even the large integratrs wh perate in develping natins face the same challenges in transitining wrk and maintaining high prductivity. Other key challenges include: Sci-Cultural barriers Immaturity f the ffshre supplier market Grwth dynamics and cnstantly changing fcus f ffshre firms Lack f understanding f supplier reputatin and histry Over reliance n supplier prvided infrmatin Objectives The Best Practices Offshre Supplier Visit Prgram is designed t assist yu as a buyer in achieving an bjective understanding f the supplier s capabilities. Given the limited client time f the visit, this prcess is designed t be infrmative, structured and efficient. By the end f the visit the client will have a deeper understanding f: 1. Supplier Capabilities: Cmpanies need t drill belw the surface f the supplier s peratins t understand the actual ability t perfrm within the scpe f the
Page: 3 agreement. It is advisable t have a lcal neutral expert help sift thrugh the key strengths f each supplier and the areas f cncern. 2. Offshre Mdels: It is imprtant t analyze the lgic behind varius perating mdels. At the end f the visit, cmpanies shuld understand ptins and mdels that are right fr their envirnment. Cmpanies shuld have a clearer understanding f pricing and savings pprtunities. 3. Supplier Reputatin: Cmpanies shuld understand the backgrund and qualitative capabilities f the ptential suppliers. 4. Cmpetitive Landscape: During the visit, cmpanies will gain an insiders view n the strategic landscape with discussins abut near term and lng-term utlks amng the prspective supply base. This understanding will help place the buyer cmpany n equal fting with the supplier. 5. Gegraphic Factrs: The visit will als assist with the learning prcess abut the culture and sci-plitical factrs assciated with the ffshre lcatin. Apprach This sectin utlines a best practices apprach fr ensuring the success f an ffshre supplier/industry visit. T make the prcess transparent and easy t understand, the activities are segregated fr the client and the third-party ffshre advisry firm. Client Firm - Cmpany Activities Prir Preparatin 1. Review and understand requirements and perfrmance standards fr scpe f wrk. 2. Review presentatins and literature frm suppliers t be visited 3. Identify the must have and nice t have qualities. Submit t expert t build int evaluatin criteria. 4. Prepare ther questins and submit t an independent expert fr insight in advance f trip Offshre Advisry Firm - Expert Activities Prepare the Client Cmpany 1. Prvide briefing packets n suppliers (include lcal histry, independent insights) 2. Recmmended questins (suggestins prvided in the appendix) 3. Detailed schedule f and rganizatin f supplier visits 4. Crdinatin f dmestic grund/air transprtatin, ldging and all lgistics
Page: 4 Prepare the Suppliers 1. Lgistics -Identify single pint f cntact fr visit crdinatin and preparatin. 2. Supplier Briefing Packet Includes visiting cmpany prfile, key questins and agenda f visit. Als includes expected meeting frmat and time allcated t each tpic and résumé s and bi s f visiting cmpany team. 3. Prvide Capabilities Questinnaire this preparatry dcument utlines specific infrmatin that the visiting cmpany is requesting the supplier t demnstrate. This infrmatin will be verified during the visit. Supplier Firm Activities Prir Preparatin 1. Review and understand visit requirements 2. Review presentatins and literature t be shared internally 3. Ensure alignment t client and advisr guidelines 4. Identify the best f breed and differentiating qualities. Include in presentatins and tur 5. Fcus n perfrmance, prcess and cnsistency rather than marketing buzz nly Visit Guidelines Ptential Outline fr Questinnaire The utline belw shuld act as a guideline and cmpanies shuld feel free adjust t fit their needs. T give cmpanies a general idea f the level f detail invlved under each sectin heading, an expanded versin f the human resurces sectin is prvided in Figure 1. The buyer cmpany shuld leave the visit with a general understanding f: COMPANY INFORMATION Ownership & Cntrl Lcatins GROWTH & FINANCIALS Grwth histry and future plans Financials HISTORY, EXPERIENCE & CAPABILITIES Present Clients Capabilities and Skills Pricing Mdels Quality OPERATIONS
Page: 5 Infrastructure Technlgy HR Custmer Orientatin Transitin & Implementatin - Critical Business Cntinuity Prgram Management and Gvernance GENERAL & ADMINISTRATION Benchmarking Change Management Cultural Issues Glbal Standards Infrastructure Savings Client Satisfactin FLEXIBILITY LEGAL, REGULATORY AND TAX ISSUES SPECIFIC PROJECT/PROCESS FOCUS TOUR SELECTED SUPPLIER FEEDBACK HUMAN RESOURCES Feedback n recruitment Brand awareness in lcal market vs. ther established emplyers. Cmpensatin levels cmparable t the industry average. Particular recruiting strengths and cncerns r issues. HR Initiatives and Plicies Key differentiatrs vis-à-vis ther supplier cmpanies. Perfrmance feedback Training methdlgy. Experience with learning curve acrss functins. Onging quality checks n individuals. Feedback and re-training mechanisms. Staffing What is the percentage f emplyees nsite (US) and ffsite? What is the average emplyee tenure? General verview f the emplyees educatinal and experience backgrund. What is the average supervisr/manager t develper/assciate rati?
Page: 6 Hw des the present staffing prfile fit with the present and future requirements? Is the supplier equipped t handle the engagement and staff as per the scpe f ptential wrk being ffshred? What will the impact be t existing peratins? Wuld they use existing resurces (nt pull back n-site staff)? Current availability f resurces? Review actual experience versus each prcess in scpe. Attritin and Retentin Strategies Attritin %. Career path fr all levels. Initiatives particular t retentin strategies? Are emplyee satisfactin surveys carried ut peridically? Figure 1: Expanded utline f human resurces visit guidelines. Details available t clients nly. Recmmendatins neit recmmends the fllwing time allcatin during the visit. This is generalized and flexible based n client needs. 1. Cmpany infrmatin. 10% 2. Grwth and financials. 5% 3. Histry, experience and capabilities. 30% 4. Operatins. 25% 5. Client experience. 10% 6. Tur f the facilities. 20% As cmpanies lk at ffshre utsurcing, they need t begin t think abut hw t execute a successful ffshre supplier visit prgram. The suggestins here are nly the start f a prgram fr hw t chse ffshre suppliers wh can achieve higher than expected perfrmance and service levels. By using these suggestins cmpanies will begin t understand the imprtance f planning and executing a rigrus due diligence prcess that will mitigate the risks related t surcing and perating an ffshre peratin, remte center r c-managed rganizatin in ffshre lcatins such as India, Philippines, Russia r China. A detailed visit guide is available nly t neit clients. If yu wuld like t discuss a prgram specific t yur cmpany needs, please cntact us.
Page: 7 Cntact Infrmatin Fr mre details abut neit s ffshre advisry and management services, please cntact: Allissn Butler Marketing Manager San Ramn, Califrnia allissn@neit.cm 925-355-0557 www.neit.cm neit Glbal Headquarters 2603, Camin Ramn, 2nd Flr San Ramn, CA 94583 USA neit Asia Headquarters 210, Bellary Rad Upper Palace Orchards Bangalre 560 080 India